Hough: What Glitches? Nasdaq Could Rise 20%

8/27/2013 10:50AM

Technical glitches forced the closing of the Nasdaq last week but despite all the negative attention, Nasdaq shares have quietly returned 36% in a year and they still look cheap. Barron's senioreditor Jack Hough joins MoneyBeat. Photo: AP.

This transcript has been automatically generated and may not be 100% accurate.

... ay ay ay mm mm ... to some very public embarrassment last week when it was forced to shut down trading for three hours ... see the paper from the next day right there ... but despite the snafu the shares of the exchange company ... are rising sharply this year there likely keep rising as Jack Allen joins us to break down all the numbers ... Jacko is like a big piece that he'll step back from what's going on in the world ... all the noise over that trading ... halt last we can ... the company announced that the company is a ... different story isn't it if you take a look that's stock chart of the past year the shares are returned thirty six percent for an effort to get in as I shares the Mets versus about twenty percent for the Essen P five hundred so ... we've had some high-profile mishaps and you can call him back to that ... to the Facebook IPO on that ... and some botched treating their ... AMR relieved this is a story about a company that is ... generating tons of cash on making more money in the key here is it's not necessarily riding the boom in trading volumes ... and one investors don't realize that ... it of around seventy percent of the money this company brings in comes from things like subscription fees and recurring revenues ... five has listing fees it sells technology for other exchanges around the world it sells market data ... so bring up trio volumes are booming right to sing a little bit of a ... of a slowdown for three years real yet what one thing and we had a ... brief Bumi algorithmic trading without some on the way down right now so ... aam even with this and you know some salt volumes after the company is making plenty of money right now ... attention is so and in other news that that's a direct influence on emerge to the smaller changes they would be number two but trading volume now ... I'm proven that analysts were too concerned about that because you say ... that ... trading has become a smaller business Dow and Nasdaq to make money though that the listings business of the big one the people mentioned ... yes ... I know they have a couple of acquisitions now that more of the city some investor relations meteor Leighton's business from Thomson Reuters that's can increase the sort of boring recurring fee business for women with the company clients ... the like ... they also have a I bought this comic on e speed which is a bond traders another good very good and they they are increase in their transaction revenues ... but in a new asset class bonds is important because ... if the Federal Reserve buying tons of Trevor is really freaking the supply of tradable bonds out there and if ... the answer are accurate that the Fed is going to begin winding down that that program soon you could see ... increased volatility in treasures effect you've already seen that ... aam but you could you currency increased supply increase trading rhymes with Activia well timed acquisition that could prove quickly for Ocado risks does Nasdaq it's ... so high yet ... another meltdown of the exchange well you know they're there or is it mean ... to risk the technical question you could see how some sort of bored downturn in financial markets and this from global downturn ... are really the risks are tempered by the fact that the stock is about twelve times earnings right now its top twenty percent cheaper than the broad market ... and if you do this aam what some of the parts analysis we value the exchange of business ... versus other change a new value that did the DIA ... data service in other products versus them a company's there ... you know you find that the Sox in a pretty good disdain over the again about a twenty percent discount to its peer companies ... we are making an apple out of apples comparisons saw the stock looks cheap a lot of free cash generation potential for higher dividends down the road so ... I think investors who are watching these headlines about the Calypso stores are an important ... but don't miss what's going on with the underlying been a spike in staff Jack thanks alot thinking